Employment law

Transfer of undertakings (protection of employment) regulations

Rossiter v Pendragon plc; Air Foyle Ltd v Crosby-Clarke [2002] IRLR 483

These joined appeals saw the Court of Appeal overrule the decision of the Employment Appeal Tribunal in Rossiter: [2001] IRLR 256.

Regulation 5(5) of TUPE was not intended to create a right to claim constructive dismissal.

The EAT went too far in deciding that it could read section 95(1)(c) of the Employment Rights Act 1996 in a 'purposive' way to comply with the Acquired Rights Directive.

The traditional test for establishing a constructive dismissal, laid down in Western Excavating (ECC) Ltd v Sharp [1978] IRLR 27, applies to a case involving a transfer of an undertaking, as any other.

The EAT had been wrong to hold that in TUPE cases, an employee can establish a constructive dismissal by reason of a substantial change in his working conditions to his detriment, even if the employer's actions do not constitute a repudiatory breach of the contract.

Mitie Managed Services Ltd v French & Others [2002] IRLR 512

Seven employees of Sainsburys Supermarkets benefited from Sainsburys' profit-sharing scheme.

The undertaking in which they worked transferred under TUPE.

The new employers also operated a profit-sharing scheme, but it was different.

A tribunal decided that the employees' contracts contained a profit-sharing clause in the terms set out by Sainsburys.

The EAT allowed an appeal, saying: 'The entitlement of the transferred employees in a case such as this ...

is to participation in a scheme of substantial equivalence but one which is free from unjust, absurd or impossible features.' It is no part of the purpose of the Acquired Rights Directive or TUPE to create obstacles to industrial reorganisation, provided that workers are properly protected and their rights appropriately safeguarded.

However, it is safe to predict that the crucial yet vague phrase 'substantial equivalence' will give rise to additional litigation.

Share options

Mallone v BPB Industries plc [2002] IRLR 452

In this noteworthy decision, Lord Justice Rix recognised that share option schemes 'can lead to controversy.

A poorly performing executive may be represented as leaving in failure but with valuable options.

Alternatively, the options may not be worth anything or very much at the time of departure, but may subsequently become valuable because an improvement in performance of his company after his leaving, or because of the re-rating of the market.

Thus the scheme can operate in a way which might seem arbitrary.

But such possibilities are always present.

An executive might be able to exercise his options before his departure, perhaps in anticipation of his employer's displeasure.

Considerations such as these ...

are not ...

a valid reason for treating the whole scheme as a sort of mirage: whereby the executive is welcomed as a participant, encouraged to perform well in return for reward, granted options in recognition of his good performance, led on to further acts of good performance and loyalty, only to learn at the end of his possibly many years of employment, when perhaps the tide has turned and his powers are waning, that his options, matured and vested as they may have become, are removed from him without explanation.'

A High Court judge had erred in holding that the rule in the scheme in question, allowing options to be cancelled at the director's discretion, dealt only with options which had not yet matured.

The structure of the rule made it clear that it was dealing with options of any kind.

Crucially, however, the judge had been entitled to find that the directors' committee acted irrationally in cancelling Mr Mallone's mature share options when he left the job.

Thus the cancellation was not lawful and effective under the terms of the scheme.

An award of compensation to Mr Mallone in excess of 100,000 was upheld.

Contracts of employment

Jenvey v Australian Broadcasting Corporation [2002] IRLR 520

The question for the High Court in this case was whether, once an employer has decided that an employee will be made redundant (where his dismissal for any other reason would deny the employee his rights under a contractual redundancy scheme), the employer may not lawfully dismiss the employee for any reason other than redundancy, unless the dismissal is for 'good cause'.

Although the situations are not identical, an analogy was drawn by the EAT with cases where there is an implied contractual term limiting the right of an employer to dismiss employees so as to deprive them of rights under a long-term sickness scheme: see, for example, Aspden v Webbs Poultry and Meat Group (Holdings) Ltd [1996] IRLR 521.

In redundancy situations, as with sickness, the employer may have promised to cater for particular circumstances by conferring a benefit on the employee according to an established scheme.

It would be contrary to the function of the scheme and its purpose to allow the employer to exercise its contractual power to terminate the contract so as to deny the employee the very benefits which the scheme envisaged would be paid.

Thus, where the employer has decided to dismiss the employee as redundant, he should not without justification be entitled to defeat the employee's claim to compensation by dismissing him for some other independent reason, or for no reason at all.

In practice, it is difficult to see in a redundancy situation what any 'good cause' could be other than lawful summary dismissal.

Sex discrimination

Hardman v Mallon t/a Orchard Lodge Nursing Home [2002] IRLR 516.

A tribunal decided that a woman was not discriminated against on grounds of sex when her employer failed to carry out a risk assessment when she was pregnant.

The EAT allowed her appeal.

The tribunal was wrong to reason that the applicant was not treated less favourably than the employer had treated or would treat a man, since the employer had not produced risk assessments in respect of any of its employees, regardless of their sex.

A failure to carry out a risk assessment on a pregnant woman, as required by the Management of Health & Safety Regulations 1999, is sex discrimination.

Carrying out a risk assessment is one way in which a woman's biological condition during and after pregnancy is given special protection.

There is no need to compare the employer's treatment of a pregnant woman with that of a comparable male employee or a non-pregnant female employee.

If the basis of the treatment is pregnancy, it is unlawful irrespective of the comparable treatment of men.

Sickness insurance

Briscoe v Lubrizol Ltd [2002] IRLR 607

An employee had rights under a long-term disability scheme as a contractual benefit.

He began a long-term sickness absence, but the insurers of the scheme took the view that he was not eligible for payment under the scheme.

The employer tried to discuss the position with him, but he failed to respond and he was, therefore, dismissed summarily.

A High Court judge ruled that he had been guilty of repudiatory conduct justifying his summary dismissal in failing, without explanation or excuse, to attend a meeting with his employer to discuss the position and in thereafter failing to reply to the employer's requests to contact him.

The Court of Appeal (by a majority) upheld that decision.

The implied contractual term that an employer will not end employment as a means of removing an employee's entitlement to benefit under a longer-term disability scheme does not circumscribe the employers' right to dismiss for 'good cause', whether this be gross misconduct or some other repudiatory misconduct.

The judge was entitled to conclude that the employee no longer intended to fulfil his part of the contract.

The employer was under no duty to warn him that if he did not make contact, he might be dismissed.

By Martin Edwards, Mace & Jones, Liverpool